The reaction in the Treasury market was less extravagant than in the equity markets following the FOMC announcement.

Volume was light Tuesday as the market awaits the FOMC announcement and we could expect that some trading desks will want to test the bullish resolve today if there is any hawkish language in the FOMC statement regarding inflation threats.

The bulls will be encouraged by Monday's behavior, but the indices now have to contend with chart resistance at the confluence of the short-term moving averages.

In Monday's trading the Nikkei 225 index (^N225) pushed ahead by 1.5% and closed just above 17000, which coincides with a chart support/resistance level. The strength in other Asian markets, which appears to be carrying over to Europe in early Monday trading, should set a positive tone to the US open later today.

The chart for the exchange traded fund that represents the euro (^FXE) shows that the currency is poised at a critical breakout level.

The chart for the Nasdaq Composite (^IXIC) continues the theme of a successful intraday test of the 200-day EMA yesterday. This index faces a significant hurdle at the 2400 level as it tries to recover.

The chart for the banking sector (^BKX), which covers the money center banks, is the one that causes the most concern from yesterday's trading. While the broker/dealer index also had a bad day, the plight of the large mainstream banks is a more critical to the credit markets.

Many indices and individual charts show inside day patterns from Monday's trading including the S&P 500 index (^SPC). Volume was subdued and the tone of the session suggests that traders and institutions are proceeding cautiously with ongoing concerns about the sub-prime mortgage sector competing with the positive and supporting bias of private equity financed acquisitions.

For large institutional portfolio managers, unlike index traders, witnessing the dramatic action of February 27 is likely to have caused more timidity and trepidation that will take some time to settle.

Since the substantial decline in Treasury yields that coincided with last week's sell-off and the flight to quality, the yield on the 10-year note has barely budged. There is a triangular formation evident from the last week of trading and a range expansion session would seem to be imminent. It may came today after the release of the February employment data.